Margaret Thatcher and the British Coal Miners’ Strike
Margaret Thatcher has died. She was one of the most influential figures of the past century, and one of the most powerful women in history. Born the daughter of a grocer, she began her career as a research chemist who helped discover soft serve ice cream (the next time you go to McDonald’s or Dairy Queen, you can think of her contribution to the invention), later becoming a lawyer and entering politics.
Not only was Margaret Thatcher voted into power as the first female prime minister in Great Britain, but she was the first British prime minster in history to be voted into office three times. Generally speaking, she, and her government, were wildly popular with most of the country, despite the vitriol and hatred she inspired in the Northern parts of the empire, especially Scotland.
Why, specifically, was she so hated? Why are you likely to see people actually rejoicing in her death? In the United States, the last time a politician was so reviled requires traveling back in time to the 1880’s when Southerners rejoiced at the murder of Abraham Lincoln. That is how deep the hatred for this woman goes among some parts of the United Kingdom.
Though she got some things wrong – she was strongly anti-equality for gay people and passed something called Section 28 that her conservative party later apologized for allowing – she got a lot of things right. It’s easy to underestimate how important her influence on the end of the Cold War was by insisting to the West that Mikhail Gorbachev could be trusted. It’s easy to forget how truly horrible the British economy was prior to her rise to 10 Downing Street.
At the core, it is her economic policies that cause so much love and hatred. (Though, her unpopular “poll tax” was also partly to blame.) To understand the reasons, you have to go back in time to the utter nightmare that was the Britain economy in the late 1970’s and early 1980’s. When Thatcher took over, most of the major industries were state-run monopolies (as one British paper points out, if you wanted an answering machine, you couldn’t go to the store to buy one, you had to put a request in to a bureaucracy and have a unionized worker come out and install it for you).
It was so bad that British government spending as a percentage of the entire economy was an almost unfathomable 44%, giving the crown way too much power and influence. To provide a contrast, here in the United States, we become damn near apoplectic if government spending exceeds 22%. All the hatred for Obama? It’s partially because government spending is a bit over 25% of GDP now, which is 3% higher than we are comfortable accepting, historically. It is not an exaggeration to say that if the spending levels during peace time had been as high in the United States, there is little doubt that we would have been engaged in a civil war.
One of the biggest offenders in the cornucopia of waste was the coal industry.
A Look at the British Coal Industry Prior to the Miners’ Strike
In a normal free market environment, supply and demand determines success. In the United States, for example, individual people, acting in their own self-interest and according to their own personal enjoyment, decided that it was better to live in the suburbs and drive an automobile. As a result, the inner-city retailers, like Kmart, lost market share, and suburban retailers, like Walmart and Kohls, gained market share. At the point Kmart wasn’t supplying society with enough value relative to what it was demanding in wages for employees and dividends for owners, it faced economic death. We sat by and allowed it to happen, as Kmart entered bankruptcy, stores were sold off, and employees given pink slips. Though it was not a pleasant thing at the time, it freed up both capital assets and human resources to focus on industries and businesses that were benefiting others.
One way to avoid this very good, though painful, outcome, is to intervene politically. In the long-run, such action is almost always a bad idea. Yet, that is what the British government had done with coal. The coal industry was unprofitable, bleeding red ink from the treasury and surviving solely because of the taxes levied on the British people, which were then thrown into the never-ending black hole that was the mining industry. This wouldn’t have been necessary but the coal unions refused to let the British industry do what was happening in the United States – namely, lay people off and replace them with machines. As the rest of the world modernized, lowering the basic cost structure of competing coal operations, the British losses grew ever-bleaker as labor, relative to revenue, was wildly out of balance with the rest of the global coal industry.
In 1983, Thatcher appointed a man named Ian MacGregor to the National Coal Board, which controlled the mines. He was famous in Britain because he had previously taken over the steel industry and, in a period of 24 months, transformed it from one of the least efficient sectors into one of the most efficient by reducing payroll and putting in productivity improvements through modernization.
On March 6th, 1984, MacGregor’s National Coal Board issued a statement that it would be closing 20 mines, and laying off 20,000 workers, to begin the process of bringing the British coal industry up to competitive levels.
Despite the generosity of the taxpayers in accepting the unprofitable coal drain on the broader society, the coal miners continued to negotiate for and demand pay raises, and threatened to strike in the heart of winter, cutting off heat for the majority of the British citizens just as the snow began to fall.
Thatcher decided that enough was enough, and if the coal industry were to survive, it would have to do it without the special interest group taking cash out of everyone else’s pockets. She also wouldn’t allow them to take the entire nation hostage in what amounted to a form of domestic extortion. She warned them to go back to work during negotiations, or she would stop the subsidies and let the free market determine the price of energy, even if that meant that every coal miner in the country lost his job.
The coal miners struck. She warned them. The coal miners ignored her. So she utterly crushed them to powder, bringing the entire industry to its knees, cutting off the subsidies, shutting the mines, and putting in place a plan to keep “a permanent stockpile of at least six months’ supply of coal, increase coal imports, build more oil-burn, nuclear and gas-fired power stations and encourage development of more opencast mines” (Source) so that the British people could never again be taken hostage by a small group that controlled the nation’s energy supply.
Her actions essentially came down to, “If you can’t survive in a free market economy, you don’t deserve to survive at all.” She refused to give into what she called the rule of the mob, and said that the rule of law must prevail; that individual people could not be subdued through the threat of violence and intimidation. (Two coal miners had murdered a cab driver who took a strike breaking employee to work.)
Without the coal mines, the communities that had been built up around them, that were staffed with undereducated, working class men, were left destitute. These were not doctors, lawyers, scientists, entrepreneurs, or engineers. They had no other marketable skills, and were not the type of people inclined to move across the country and try something new. Many remained in the now-broke communities, began drawing government benefits, and spent the rest of their lives blaming Thatcher for the fact that their families had gone from prosperity to total destitution; from a new car in the garage to barely being able to eat.
My personal belief is there was a significant degree of misogyny in the opposition to Margaret Thatcher. You had a group of poorly educated males, in a very patriarchal social structure, fighting for their pride and livelihood only to have a woman, who was part of the intellectual elite with whom they had nothing in common, utterly destroy them. This was a time when, even in the United States, it was unheard of for a woman to be in power. Kathryn Graham had only become the first CEO of a Fortune 500 company a couple of decades before, and that was solely because she was the controlling stockholder and didn’t have to worry about a glass ceiling! You wouldn’t have seen nearly the same degree of vitriol had she been a man. When Thatcher would enter the House of Commons, some of her opposition would chant, “Ditch the bitch” and they referred to her as “Atilla the Hen”.
The Privatization of British Industry
Along with the coal strike situation, Thatcher began to have government businesses go private, raising money for taxpayers and inviting competition. The productivity gains were impressive.
(Side note: Great Britain has experienced the same phenomenon we saw here in the United States. Industries such as manufacturing are far more profitable and successful today than they were in the past, yet it doesn’t seem like it because the productivity gains from automation and technology caused the output per worker to skyrocket exponentially, resulting in fewer people employed in the sector. According to the United Kingdom Office for National Statistics, manufacturing output has increased in 35 of the 50 years between 1958 and 2007, with 2007, the year before the Great Recession, representing an all-time high that, in inflation-adjusted terms, was twice that of the 1958 levels. At the same time, other sectors have grown much faster (e.g., huge software, video game, and computer hardware companies were much rarer back then) so that the overall percentage of the economy has been diversified and manufacturing now makes a smaller percentage of every dollar of GDP. You sometimes see those without a particularly strong math background interpreting that latter figure – the one showing manufacturing declining as a percentage of GDP due to the diversification of the British economy – as being a “decline in manufacturing” in the sense that the layperson thinks of it, which is totally inaccurate since manufacturing itself is twice its former size in real pounds sterling.)
The Most Important Thing Thatcher Got Right
The single most important lesson we can learn from Margaret Thatcher is that everything must eventually be traced back to individuals and families. Specifically, one of the most brilliant quotes she ever gave:
I think we have gone through a period when too many children and people have been given to understand “I have a problem, it is the Government’s job to cope with it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless, the Government must house me!” and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people and people look to themselves first… There is no such thing as society. There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.
That is life changing. It’s the same as Charlie Munger’s “Little Red Hen” philosophy from the famous children book of the same name. If you apply it in your own life, it can help you achieve enormous things.
Thatcher On Non-Elected Government Power
Thatcher loathed government power and did everything she could to undermine it so that individuals were given more freedom of choice, even if that meant they ended up with terrible lives (after all, freedom means having the freedom to fail). When certain members of the government were calling for Great Britain to surrender its sovereignty to a European currency, a European court system, a European executive, and unelected commissions with ever increasing powers, she gave her famous “No, No, No” speech.
Thatcher on Income Inequality and a Unified Currency
Thatcher also didn’t give a hoot for income inequality as long as the overall level of living standards was rising so that everyone was absolutely better off, which is a position I personally find agreeable and rational. She also ruthlessly fought against having Britain join a single currency in Europe, which is one of the reasons that England today doesn’t have nearly the same troubles as many of the nations utilizing the Euro (by maintaining the currency in a form that the printing presses were controlled, the monetary supply can be increased to avoid catastrophic austerity). She loathed the idea of a European Central bank that wasn’t accountable to the British parliament. She knew that if you gave the bankers control of the monetary supply with no means to constrain them, you’ve destroyed yourself. She saved England from the fate Spain and Greece are suffering now.
The Bottom Line on Margaret Thatcher’s Legacy
If you are a member of the middle class or upper class, with a good education, engaged in some sort of knowledge work where you, yourself, are the asset, and you are responsible, Margaret Thatcher’s policies benefited you enormously. Your life is better because of them. Your shopping choices are wider, your employment options are greater, your opportunity to make a lot of money is expanded. You have more freedom to imagine the life you want, and to bring it into existence through concerted action.
If, on the other hand, you are a lower class, undereducated manual worker relying on government subsidies, Thatcher’s policies were economically devastating in a way that is hard to overstate. You lost your home, your job, and your self-respect. You now exist on an endless stream of welfare checks in one of the numerous villages that are shells of what they once were.
Though I strongly disagree with her about certain things, and think her interpersonal style was damaging to her own self-interests, I think that overall, Margaret Thatcher was necessary for the British people at the time. She did what had to be done and addressed the big concerns of the nation. Without her, Britain would have eventually found its way into a Greece-like implosion of austerity so severe that it would make the cuts she put in place look like a joke or inflation so out of control that it would have been irreparable, depending on the path chosen by subsequent politicians in this alternate universe where she didn’t exist. Thatcher was also an enormous ally to the United States at a time when the world was splitting between free and totalitarian government regimes, despite some significant lapses in judgment (e.g., her friendship with Chilean dictator Pinochet). I think that the eventual long-term balancing of Tony Blair as Prime Minister in the new post-Thatcher world was a very good development as he stuck with the parts of her reforms that mattered, but seemed to take into account the human considerations of policy decisions.
To see how individual Britons were affected by Thatcher’s economic policies, see this BBC story that breaks it down in nice detail.